Summary

Form 13-F filings reveal fund managers' top arbitrage stocks.

Top deal stocks of the 36 funds I follow.

LinkedIn most popular M&A stock at the end of Q3.

I have been tracking hedge funds that employ the merger arbitrage strategy through 13-F filings for as long as I can remember. While always interesting and insightful to peek into their portfolios, I find it particularly intriguing this time considering the fear present in many M&A stocks.

My rules:

I only count a stock if it is at least 1% of the fund's portfolio.

I only include stocks that are still actively trading.

I only choose funds where the vast majority of the positions are merger-related.

Of the 36 funds I track for the quarter ending September 30, 2016, LinkedIn (NYSE:LNKD) was overwhelmingly the top merger arbitrage stock. Microsoft (NASDAQ:MSFT) is in the process of buying LinkedIn in a deal expected to close later this year. EU approval is still needed.

St. Jude Medical (NYSE:STJ) was next with 22 of the fund's holding it. Abbott Labs (NYSE:ABT) is acquiring St. Jude in a stock-and-cash deal valued around $25 billion.

WhiteWave Foods (NYSE:WWAV) is in 18 of the funds. They are in the process of being acquired by French multinational Danone (OTCQX:DANOY) for $56.25 per share.

I use all the above information as a supplement to my own research and work, which consists of reading filings, watching the tape and using options to establish positions. There is no guarantee that the above deals will close. Many funds have had busted deal stocks such as Allergan (NYSE:AGN) in their portfolios.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.